Safe bet: Investors should look for less volatile medium-term gilt funds

However, lower liquidity in ETF could erode investors' gains

Motilal Oswal Asset Management Company has launched the 5-year G-Sec Exchange Traded Fund (ETF). At a time when gilt funds with 10-year constant duration are showing a one-year category average return of 12.4 per cent, this new fund offer is sure to garner investor interest.

All gilt funds are attracting investor interest now for two reasons. One, they invest in government securities and, hence, eliminate credit risk — something debt fund investors have been worried about for a while now. Past re­turns have also been sound. In a decli­n­ing interest-rate scenario (the 10-year G-Sec has declined 62 basis points over the